It's Saturday September 29, 2007. We capped off the month of September, and the third quarter, on a positive note. The Dow Jones industrials rose over 3 and a half percent, the broader S&P 500 gained better than 1 and a half, and the tech-heavy NASDAQ rose 3.8 percent in the quarter. The trend is upward as the recent economic data suggests the Federal Reserve has room to cut rates further (since the 50 basis point cut of the federal and discount rates on September 18^th). August core inflation is up to 1.8 percent from last year, but it's within the Fed's so-called comfort zone. With this tame inflation, the Fed is more likely to cut and further stimulate economic growth. Consumer spending is strong as well, gaining a better than expected .6 percent.

Unless you're living in a hole, you know housing is in the trouble zone. Expectations are the troubles will continue as far as the eye can see. That means sell the home builders like KB home (KBH) and Lennar (LEN), which just reported a loss in the fiscal third quarter as revenue fell 44 percent. While the credit crunch and mortgage troubles hurt results in the quarter, Lennar continues to face pricing pressures in the industry.

Retailer Target (TGT) cut its September same-store sales forecast, also expecting a weaker holiday shopping season as consumers struggle with higher energy costs and a weaker housing market. Same-store sales are expected around 2.5 percent higher in September. That's down from an expected 4 - 6 percent increase. But keep in mind that Target is a well-run business, and they're being cautious. That's going to turn around. Keep in mind wages are on the rise. Target is a buy. It closed Friday at $63.57 and on the way to $75 per share.

It's a fairly busy week ahead for economic news. On investors minds will be any data supporting further cuts from the Fed, with a close eye on the big jobs report. Key news on the struggling auto industry comes out Monday with the release of Truck and Auto sales, which Wall Street expects to indicate a slight decline. Thursday it's initial jobless benefits and a look at business spending with factory orders data. The granddaddy of economic reports, the September jobs report will be out Friday including non-farm payrolls and hourly earnings. The market expects a slight increase in the jobless figure from last month's 4.6 percent. The market also expects about 94,000 jobs were added in September. Any surprises to the downside can be tough on stocks. But expectations are for the goldilocks scenario with data that’s not too strong, but not too weak. The Street will probably get something in-between.

Earnings season unofficially starts when aluminum maker Alcoa (AA) reports October 9^th. But this week some companies of note report results. Walgreen's (WAG) has 4^th quarter earnings before the market opens Monday. Don't buy the stock until afterwards because you never know how the market will react to earnings. Walgreen's, with its solid management and same-store sales results, is a strong buy for the long term investor. The stock closed at $47.24 Friday. It's on the way to $55. Additionally, Micron Tech (MU) the semiconductor company reports Tuesday. On Thursday is beer and wine maker Constellation Brands (STZ) with quarterly results.

That's all for today. Write me with any questions or comments at the 'contact us' link on this page. My website is www.daveonstocks.com. This is Dave On Stocks.

DAVE HARRIS